Rather than discounting rental rates, more storage properties are offering some type of rental incentive or sales promotion to entice new customers. Likewise, customers are asking for or responding to advertised specials. Promotions change the accepted price-value relationship by increasing the value or lowering the price of the offering. Examples of consumer-sales tools include contests, branded giveaway merchandise, bonus-size packaging supplies, limited-time discounts and coupons.
Sales promotions are a competitive weapon that provide an extra incentive for the target audience to purchase or support one brand over another. They usually operate on a short timeline, use a more rational appeal, return a tangible or real value, foster an immediate sale, and contribute highly to profitability. Promotions can benefit your company and differentiate your storage property in a meaningful way from your competitors.
Economic Impact of Concessions
There are many consequences of offering rental concessions. Some will be advantageous to your facility, such as increased occupancy, while others may actually hinder your self-storage operation’s success in the long term. You should consider each of these concession types carefully before introducing them in your market.
Free rent. Offering a one-time concession doesn’t lower the value of the storage property. And, it doesn't affect the customer’s buying psychology. Also, you’ll find current tenants may compare rental rates and then want a lower price if you advertise the discount.
Discounted rent. Discounts can erode the standard price you’re asking for your storage space. It will also adversely affect the value of the property. Most storage properties offer some kind of long-term rental discount; however, discounts of an unspecified length make raising rents much more difficult.
If your store is in distress, you may want to consider a variety of discounts and concessions to new customers. Be careful not to discount or devalue the sizes that are in demand and have a high occupancy—more than 90 percent. Commonly, storage properties offer a free month on any size space. This is not a good practice if you only have one space available. Also, you may want to implement rental incentives that do not directly affect the customer’s rental rate. This can include free use of the facility’s move-in truck or free supplies with each new rental.
Rent variances. These are the silent killers of a self-storage property’s income! Rent exceptions and variances dramatically affect property value. If you have $1,500 worth of monthly rent exceptions, your facility has a loss in value of $180,000 at a 10 percent capitalization rate. It’s important to watch the variances monthly and work at decreasing the number of customers who have any type of discount.
Selling Storage Space
One of the things I’ve learned about managing storage properties and maximizing a store’s profitability is employees are critical to the property’s success. It’s important to make the prospective customer your priority and have employees who make a true effort to sell the space.
Even if most of your customers come from the Internet, your staff still needs to be excellent at selling on the phone and in person. Make time to tell and sell each customer on the benefits of renting from your property. The more well-trained managers you have working for you, the less you will need to discount your storage spaces.
Carol Krendl, an industry expert and owner of SkilCheck Services, has been involved with the self-storage industry since 1984. She’s written many articles on a variety of industry topics, including a quarterly newsletter on self-storage sales and customer service. Lodi, Calif.-based SkilCheck provides customized training seminars, educational products and mystery shopping. For more information, call 800.374.7545; visit www.skilcheck.com .